W.  N.  JOHNSON 

ERIE,  PENNSYLVANIA 
FEBRUARY  1 . . 1906 


HE  INSURANCE 

I TRUST"IIZZ] 


WHAT  IT  IS  AND 
ITS  RELATIONS  TO 
T H E P U B L I C ‘ 


» 


"The  Insurance  Trust 

WHAT  IT  IS  AND  HOW  THE  PUBLIC  ARE 
AFFECTED.  © FACTS  YOU  SHOULD  KNOW 


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HE  disclosures  which  have  attended  the 
recent  investigation  in  New  York  City  by 
a special  committee  of  the  New  York  legis- 
lature of  the  methods  of  . the  life  insurance 
companies,  have  naturally  given  rise  to 
inquiries  as  to  the  methods  of  the  fire  insurance  comparics 
as  well.  This  is  the  more  natural  because,  notwithstand- 
ing the  fact  that  practically  every  property  owner  in  the 
country  is  carrying  fire  insurance,  he  has  but  a faint  idea 
of  the  principles  of  the  business  and  does  not  understand 
why  it  is  not  conducted  in  the  same  manner  as  any  ether 
business.  Unfortunately  for  insurer  and  insured  alike,  • 
there  is  a wide-spread  prejudice  against  fire  insurance 
A'"- companies  which  ought  not  to  exist.  On  the  contrary,  • 
the  relations  between  the  insuring  pubKc  and  the  compan- 
,^ies  should  be  of  a friendly  and  cordial  character,  which 
can  only  exist  when  there  is  a more  thorough  understand- 
ing of  the  fundamental  principles  of  the  business  and  a 
more  general  realization  of  the  fact  that  the  methods 
pursued  by  the  fire  insurance  companies  must  be  such  as 
will,  at  the  same  time,  provide  for  their  own  stability  and 
secure  to  their  patrons  that  ABSOLUTE  INDEMxNITY 
which  is  to  be  their  only  protection  against  financial  ruin 
in  case  of  fire. 

That  such  friendly  relations  do  not  exist  is  no  doubt  ® 
largely  due  to  the  fire  insurance  companies  themselves,  for 
they  seem  to  have  made  no  particular  effort  to  enlighten 
the  public  as  to  those  matters  concerning  which  it  was 
entitled  to  full  information.  The  time  has  come  when 
tliis  information  should  be  no  longer  withheld  and  it  is 


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the  purpose  of  this  article  to  give  tliis  information  frankly 
and  fairly,  so  that  every  policy  holder  may  know  whether 
he  has  any  just  cause  for  complaint  because  of  the  manner 
in  which  the  fire  insurance  business  is  being  conducted. 

The  policy  holder  should  bear  in  mind : 

1.  That  insurance  is  a tax  and  that  the  insurance 
companies  may  be  regarded  as  the  agents  for  the  collec- 
tion of  that  tax  in  small  sums  from  the  many  in  order  to  pay 
it  out  to  the  comparatively  few  who  sustain  loss  by  fire. 

2.  That  the  capital  which  the  stock  companies 
adventure  in  the  business  is  the  guaranty  which  they  offer 
to  the  public  as  an  evidence  of  their  ability  to  promptly 
pay  all  losses  for  which  they  may  be  liable. 

3.  That  the  insurance  companies  must  ©ollect  an 
amount  sufficient  to  pay  all  losses,  all  expenses  incurred 
in  transacting  the  business,  together  with  a reasonable 
profit  upon  their  capital  invested,  or  they  will  be  com- 
pelled to  retire  from  the  business. 

4.  That  it  is  of  the  first  importance  to  the  policy 
holder,  therefore,  that  adequate  rates  upon  all  classes  of 
property  should  be  collected  by  the  companies,  otherwise 
he  may  find  his  policy  worthless  in  event  of  his  property 
being  destroyed  by  fire.  It  is  almost  of  equal  importance 
that  the  rates  of  insurance  shall  be  no  higher  than  the 
experience  of  the  companies  has  shown  to  be  fair,  and 
that  there  shall  be  no  discrimination  whereby  he  is  made 
to  pay  a higher  rate  than  his  neighbor  upon  exactly  the 
same  character  of  risk. 

It  must  be  apparent  that  the  cost  of  insurance  to  the 
policy  holder  will  necessarily  be  higher  when  the  losses 
are  heavy  and  the  expenses  of  transacting  the  business 
large,  than  it  will  be  when  the  losses  are  light  and  the 
expenses  moderate.  In  this  connection  it  is  proper  to 
consider  the  question  whether  the  rates  or  cost  of  insur- 
ance are  unfairly  and  extortionately  increased  by  a com- 
bination, constituting  what  is  popularly  believed  to  be 


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“AN  INSURANCE  TRUST.” 


A “ Trust,”  in  the  popular  sense,  is  a combination  of 
persons  or  corporations  formed  for  the  purpose  of  stifling 
competition  and  establishing  a monopoly  of  the  article, 
commodity  or  thing  to  be  produced,  manufactured  or  sold, 
so  that  unreasonable  and  exorbitant  prices  may  be 
charged,  to  the  detriment  and  injury  of  the  public. 

In  order  that  a combination  of  fire  insurance  interests 
may  be  formed,  whereby  rates  of  insurance  can  be  fixed 
and  maintained  without  regard  to  whether  they  are  just 
and  equitable,  it  is  necessary  that  all,  or  nearly  all,  of  the 
companies  engaged  in  doing  a general  business  should 
enter  such  combination.  Unless  a sufficient  number  of 
companies  can  be  induced  to  combine  to  pradtically 
prevent  competition,  it  is  impossible  to  “corner  the  mar- 
ket” so  as  to  control  the  business  and  maintain  an 
exorbitant  tariff  of  rates.  The  difficulty,  if  not  the  impos- 
sibility of  forming  such  a combination  may  be  appreciated 
when  it  is  understood  that  there  are  three  classes  of  com- 
petitors for  the  business,  and  that  the  interests  of  each 
absolutely  conflicTc  with  those  of  the  other  two.  These 
competitors  are  the  stock  companies,  the  mutuals  and  the 
Lloyds.  The  stock  companies  do  not  now  and  never 
have  agreed  among  themselves  as  to  rates  and  many 
other  things,  as  will  be  hereafter  shown.  The  mutuals 
are  organized  and  operated  upon  the  fundamental  idea 
that  they  can  furnish  their  members  with  insurance  at  less 
cost  than  the  stock  companies  charge.  The  Lloyds  are 
often  — though  not  always^ — managed  by  designing  men 
for  their  own  gain,  who  are  guerillas  in  the  business,  com- 
peting with  both  stock  and  mutual  companies  for  business 
at  any  rate  which  will  secureit,  without  regard  to  whether 
their  losses  are  paid  or  not. 

During  the  past  year  there  were  225  stock  companies 
operating  in  the  United  States,  not  all  in  any  one  state. 


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but  all  ready  to  do  so  if  the  conditions  had  been  favor- 
able to  their  doing  so  at  a profit. 

The  actual  number  of  mutuals  cannot  be  stated  with- 
out a careful  compilation  of  statistics,  but  at  a conservative 
estimate  they  must  more  than  double  the  number  of  stock 
companies. 

The  Lloyds  and  their  kindred  are  constantly  changing 
in  number,  name  and  location,  as  circumstances  may  be 
more  or  less  favorable  to  their  peculiar  methods  of  opera- 
tion. At  the  close  of  1 902  there  were  40  known  con- 
cerns, while  at  the  close  of  1904  they  had  inaeased 
to  100. 

Besides  the  competitors  named  above,  there  were 
1 5 1 unlicensed  stock  companies  in  the  field  during  the 
past  year,  seeking  such  business  as  could  be  secured 
through  the  inducement  of  large  reductions  from  the  rates 
offered  by  the  authorized  stock  companies. 

With  this  array  of  competitors,  aggregating  over  one 
thousand  in  number  and  representing  CONFLICTING 
INTERESTS,  it  must  be  apparent  that  the  people  have 
little  occasion  to  fear  the  organization  of  an  “Insurance 
Trust.’*  While  this  fact  must  be  clear  to  every  intelligent 
man,  there  is,  nevertheless,  some  occasion  for  the  appre- 
hension of  the  public  that  a combination  does,  in  fact, 
exist:,  which  establishes  and  maintains  rates  that  are  exces- 
sive and  inequitable.  There  are  associations  in  the  East 
South,  West,  and  on  the  Pacific  Coast  which  do  many 
things  not  fully  understood  by  the  property  owners  and 
others  affected  by  their  operations,  but  concerning  which 
it  is  for  the  interest  of  all,  both  the  associated  companies 
and  their  patrons,  that  the  actual  facts  should  be  known. 

As  prelimmary  to  a statement  of  the  purposes  of  these 
organizations  or  associations,  it  should  be  understood  that 
after  the  great  Chicago  and  Boston  fires,  an  association 
of  the  surviving  companies  was  formed  and  operated  for 
a number  of  years  for  the  purpose  of  maintaining  such 


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rates  as  would  recoup  them  for  the  heavy  losses  they 
had  sustained,  as  well  as  to  enable  them  to  accumulate 
a surplus  which  should  be  found  a bulwark  of  strength 
and  protection  to  their  policy  holders  whenever  future 
great  conflagrations  should  again  test  their  resources.  The 
methods  of  this  association  were  not  entirely  satisfactory 
and,  after  a few  years,  it  ceased  to  exist.  Thereafter 
such  utter  demoralization  prevailed  that  the  stability  of 
the  companies  was  most  seriously  threatened.  In  1879 
the  situation  had  become  so  grave  in  the  field  commonly 
known  as  the  Western  States  that  a meeting  of  the 
managers  of  the  companies  operating  therein  was  called 
and  an  association  was  formed  which  has  existed  from 
that  time  to  the  present,  and  as  a statement  of  its  purposes 
will  apply  equally  to  other  similar  organizations  in  other 
parts  of  the  country,  reference  will  here  be  made  only 
to  the  association  so  formed  and  known  as 

“THE  union;’ 

This  association  was  formed  to  meet  a crisis  in  the 
insurance  business,  when  the  conditions  brought  about 
by  unreasoning  competition  had  caused  the  failure  or 
retirement  of  many  companies  and  imperilled  the  very 
existence  of  many  others.  Rates  had  been  reduced 
below  the  paying  point,  while  the  expenses  of  the  busi- 
ness had  been  enormously  increased.  Realizing  that  if 
the  insurance  companies  were  to  survive  and  continue 
to  meet  their  loss  obligations  reforms  must  be  promptly 
instituted,  these  managers,  representing  less  than  one  half 
of  all  of  the  companies  engaged  in  business  in  the  West, 
courageously  resolved  to  devote  their  energies  to  restoring 
the  business  to  a sound  financial  basis  and  to  regaining 
the  confidence  and  respect  of  the  public,  which  had  well 
nigh  been  lost,  'i  his  association,  thus  organized,  has 
been  in  operation  ever  since  and  during  the  twenty-six 
years  of  its  existence  has  been  and  still  is  the  exponent 


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of  everything  which  conduces  to  sound  and  healthy  under- 
writing. It  cannot  claim  to  have  made  no  mistakes,  but 
it  has  always  had  in  view  these  fundamental  ideas  : 

1.  Absolute  Indemnity  to  Policy  Holders. 

This  object  can  only  be  secured  through  the  observ- 
ance of  correct  principles  of  underwriting  and  the 
maintenance  of  rates  upon  a basis  which  will  produce  a 
sufficient  amount  of  premiums  to  enable  the  companies  to 
pay  accruing  losses,  the  necessary  cost  of  operation,  a fair 
profit  upon  the  capital  invested  and,  above  all,  the  gradual 
accumulation  of  a surplus  against  that  “Rainy  Day” 
which  must  surely  come,  when  the  companies  will  be 
again  called  upon  to  meet  excessive  losses  in  some  great 
conflagration  like  that  of  Chicago  or  Boston,  or  more 
recently  that  of  Baltimore  or  Toronto.  THE  UNION 
accordingly  maintains  a “ Classification  Bureau,”  by  means 
of  which  the  individual  experience  of  the  associated  com- 
^panies  is  assembled  and  tabulated  for  the  common  good. 
In  no  other  way  could  this  important  information  be 
obtained  and  utilized.  For  many  years  each  company 
has  jealously  guarded  its  own  “ Experience  or  Classifica- 
tion Tables”  as  a trade  secret,  and  until  this  Classification 
Bureau  was  established  it  was  impossible  to  base  the  rates 
upon  the  various  classes  of  risks  on  the  general  and 
average  experience  of  a large  number  of  companies. 
Now  the  cost  of  carrying  every  class  of  risk  can  be  ascer- 
tained and  rates  fixed  by  careful  and  scientific  methods 
in  accordance  with  the  average  results  thus  ascertained, 
and  a corps  of  experts  is  maintained  for  the  purpose  of 
preparing  rating  schedules  upon  the  various  classes  of 
insurable  property  based  upon  such  experience. 

2.  Economy  in  Management. 

When  the  operating  expenses  can  be  reduced,  the 
rates  of  insurance  can  be  correspondingly  lowered.  Before 

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the  organization  of  THE  UNION  every  company  engaged 
in  a general  business  was  obliged  to  maintain  its  own  corps 
of  field  men  for  the  purpose  of  fixing  its  own  rates,  sur- 
veying and  inspecting  its  own  risks,  making  its  own  maps 
and  diagrams  and  performing  the  other  duties  incident  to 
the  business.  The  expenses  in  proportion  to  receipts  were 
excessive  and  the  results  obtained  were  never  entirely 
satisfactory.  By  association  THE  UNION  has  substituted 
for  the  cumbersome,  expensive  and  unsatisfactory  methods 
of  former  years  many  reforms  which,  while  reducing 
expenses,  have  greatly  improved  the  efficiency  of  the 
service  rendered  and  have  been  of  immense  benefit  to 
the  public  as  well.  It  has  been  able  to  and  does  do 
many  things  v/hich  were  impossible  of  accomplishment 
without  such  association  and  co-operation.  In  addition 
to  its  Classification  Bureau  with  its  scientifically  prepared 
schedules,  it  recommends  uniform  practices  in  the  manner 
of  conducting  the  business  and  concurrent  forms  of  policies 
upon  important  individual  risks ; it  maintains  an  “ Under- 
writers’ Laboratory”  wherein  practical  tests  are  made  of 
the  fire  resisting  qualities  of  the  various  building  materials 
and  their  relative  desirability  as  such,  and  there  inspec- 
tions are  had  and  tests  made  of  heating  and  lighting 
devices  with  a view  to  establishing  rules,  regulations  and 
Kecom*mendations  for  their  installation  and  use,  .as  well  as 
to  determine  the  character  and  possible  danger  of  the 
materials  employed  in  producing  heat  and  light  thereby ; 
it  maintains  a corps  of  experts  whose  duty  it  is  to  prepare 
plans  and  specifications  for  property  owners  who  desire 
to  equip  their  buildings  or  plants  with  efficient  sprinkler 
systems,  together  with  estimates  of  cost  of  the  same  and 
the  probable  reduction  of  rates  upon  buildings  and  plants 
thus  equipped,  and  also  to  make  periodical  inspections  of 
all  such  buildings  and  plants  for  the  purpose  of  seeing 
that  such  equipments  are  maintained  in  efficient  condition ; 
it  has  its  own  “ Inspection  Bureau  ” whereby  various  risks 


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are  inspected,  their  construction,  occupancy,  external  and 
internal  hazards  and  fire  protection  ascertained,  investiga- 
tions made  as  to  the  extent  and  efficiency  of  fire  depart- 
ments and  water  supply,  character  of  streets  and  other 
important  matters  incident  to  the  prevention  or  suppres- 
sion of  fires  and  the  extent  of  the  conflagration  hazard, 
if  any,  of  the  cities  and  towns  thus  inspected.  It  also 
employs  its  own  electrical  engineers  for  the  purpose  of 
inspecting  and  reporting  upon  defects  in  electrical  equip- 
ment in  the  various  buildings  in  each  city  and  town  within 
its  jurisdiction,  and  WHENEVER  NOT  PROHIBITED  BY 
LAW,  it  employs  skilled  and  experienced  men  to  apply 
the  various  rating  schedules  for  the  purpose  of  establishing 
fair,  just  and  equitable  rates  upon  all  classes  of  properly 
within  its  jurisdiction. 

In  one  direction  the  efforts  of  THE  UNION  to  benefit 
the  public  by  economy  in  management  have  signally 
failed.  At  the  time  of  its  organization  and  for  many 
years  thereafter  one  of  its  cardinal  rules  was  that  no  agent 
should  be  allowed  more  than  fifteen  per  cent  commission 
upon  the  premiums  received  by  him  upon  any  class  of 
property.  Competing  companies,  outside  of  THE  UNION, 
speedily  took  advantage  of  this  rule  by  agreeing  to  pay 
to  agents  representing  Union  companies  greater  commis- 
sion than  fifteen  per  cent,  and  by  that  means  secured  a 
large  amount  of  desirable  business  which  had  hitherto 
been  written  by  Union  companies,  or  which  would  have 
been  so  written,  if  the  agents  had  not  been  induced  to 
place  the  insurance  where  they  could  procure  the  great- 
est compensation  therefor.  For  over  eighteen  years  the 
Union  companies  endured  this  unequal  competition, 
endeavoring  to  maintain  the  principle  that  the  public 
should  not  be  required  to  pay  excessive  commission 
charges  to  agents,  and  believing  that  15  per  cent  was 
ample  remuneration  to  the  agent  for  the  services  rendered. 
During  this  time  several  states  passed  laws  which 

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prohibited  insurance  companies  from  agreeii>g  upon  the 
amount  of  commissions  to  be  paid  to  agents.^  Being 
restrained  by  law  in  some  states  from  agreeing  to  hold 
agents’  commissions  within  reasonable  bounds,  and  having 
sustained  serious  losses  in  premium  receipts  in  the  entire 
field  because  of  this  attitude,  THE  UNION  has  been 
reluctantly  obliged  to  recede  from  its  position  and  admit 
that  unless  it  can  have  the  co-operation  of  those  most 
intimately  concerned  — the  insuring  public  — it  cannot 
keep  this  important  item  of  expense  within  the  limits 
which  it  regards  as  reasonable. 

3.  Reduction  in  the  Fire  Waste. 

The  destruction  of  valuable  property  by  fire  is  a 
public  calamity,  whether  the  immediate  loss  falls  upon 
the  individual  owner  or  upon  the  insurance  companies. 
It  is  the  absolute  destruction  of  material  wealth  and  value. 
The  annual  fire  waste  in  the  United  States  is  enormous 
and  whatever  can  be  done  to  reduce  or  prevent  this 
destruction  of  property  values  operates  for  the  benefit  of 
the  public.  Property  owners  could  well  afford  to  pay 
double  the  present  insurance  tax  if  thereby  they  could 
purchase  ABSOLUTE  IMMUNITY  FROM  FIRE,  instead 
of  being  INDEMNIFIED  FOR  LOSSES  WHICH  THEY 
SUSTAIN  BY  FIRE.  THE  UNION  has  not  confined  its 
energies  to  the  narrow  limits  of  ensuring  the  stability  and 
undoubted  strength  of  its  associated  companies,  but  has 
devoted  much  time  and  incurred  much  expense  in  efforts 
to  minimize  the  fire  hazard  in  every  city  and  town  in  its 
jurisdiction,  realizing  that  its  peculiar  relations  to  the  public 
enabled  it  to  promote  this  object  when  the  municipal 
authorities  were  apathetic  or  absolutely  insensible  to  the 
necessity  for  efforts  in  this  direction. 

It  has,  therefore,  encouraged  the  application  of  its 
carefully  prepared  schedules  in  the  rating  of  insurable 
property  throughout  the  territory  within  its  jurisdiction. 


I Page  9 I 


either  by  its  own  experienced  employes  or  by  indepen- 
dent experts  and  rating  associations.  In  no  other  manner 
can  just  and  equitable  rates  be  made  and  proper  credits 
given  for  improvement  in  risks  or  charges  made  for 
increase  of  hazard.  Every  encouragement  is  given  to 
each  individual  property  owner  to  improve  his  own  risk 
so  that  he  can  obtain  lower  rates ; he  is  shown  how  his 
building  is  rated  and  advised  as  to  what  he-  can  do  to 
make  it  better  and  safer.  Each  change  for  the  better 
thus  serves  to  minimize  the  fire  hazard  of  surrounding 
property  and  so  the  whole  character  of  a town  is  gradu-- 
ally  improved.  In  this  manner  THE  UNION,  with  its 
carefully  prepared  schedules  for  rating  all  classes  of  risks, 
has  done  more  than  all  other  agencies  combined  to 
improve  the  character  of  cities  and  towns,  to  secure 
better  buildings,  to  improve  old  ones,  to  increase  the 
efficiency  of  fire  departments,  to  provide  better  water 
supply  with  larger  mains,  to  improve  streets  and  alleys, 
to  reduce  the  possibilities  of  fire,  to  increase  the  facilities 
for  fighting  the  same  and  to  minimize  the  conflagration 
hazard  which  is  present  in  a greater  or  less  degree  in 
every  city  and  town.  THE]  UNION  has  accomplished 
so  much  good  in  this  direction,  by  making  discriminating 
charges  for  deficiencies  and  credits  for  improvements,  as 
to  be  entitled  to  the  confidence,  respect  and  encourage- 
ment of  property  owners  and  the  public  everywhere. 

The  general  conflagrations  at  Baltimore,  Rochester, 
Toronto  and  other  places  during  the  year  1904  have 
directed  the  attention  of  THE  UNION  to  the  alarming 
fact  that  conditions  similar  to  those  which  contributed  to 
the  widespread  and  destructive  fires  at  those  places 
exist  in  other  cities.  These  conditions  generally  consist 
of  poorly  constructed  buildings  with  dangerous  occupancy, 
unprotected  openings  in  rear  and  side  walls,  inadequate 
fire  department  and  insufficient  water  supply  and,  while 
confined  to  limited  areas,  they  make  it  possible  for  a fire 

[ Pase  IQ  ] 


to  speedily  get  beyond  control  and  sweep  everything 
before  it.  There  never  having  been  any  adequate  effort 
made  upon  the  part  of  municipal  authorities  in  any  city  to 
remedy  these  conditions  which  imperil  the  vast  property 
values  therein,  THE  UNION  has  conceived  it  to  be  a 
duty  it  owes  to  the  public  to  ascertain  where  these  con- 
ditions exist,  designate  the  particular  localities  where  they 
may  be  found,  specify  what  they  are  and  what  must  be 
done  to  eliminate  them  entirely  or  to  improve  them  as  much 
as  possible,  at  the  same  time  advising  the  proper  officials 
of  such  betterments  as  seem  to  be  necessary  in  the  way 
of  fire  apparatus,  water  mains  or  water  supply  and  show- 
ing individual  property  owners  how  their  own  buildings 
can  be  improved  and  made  reasonably  secure  against 
fire,  either  within  or  without.  With  this  purpose  in  view, 
it  has,  through  its  committees  and  trained  experts,  been 
engaged  during  the  past  year  and  Is  now  engaged  in  this 
important  work.  These  localities  presenting  unusual  faci- 
lities for  breeding  uncontrollable  fires,  for  which  no  provi- 
sion has  been  made  in  existing  rating  schedules,  it  has 
been  found  necessary  to  take  account  of  the  same  by 
proper  “ conflagration  charges,”  but  as  it  is  the  desire 
rather  to  reduce  this  conflagration  hazard,  than  to  increase 
the  rates,  a reasonable  time  is  always  given  for  the  requisite 
improvements  to  be  made,  before  such  charges  go  into 
effect.  As  THE  UNION  has  no  other  means  of  securing 
this  much  needed  improvement  in  the  conflagration  breed- 
ing centres  of  the  various  cities,  it  increases  the  rates  upon 
individual  risks  within  the  designated  limits,  if  the  stipu- 
lated requirements  are  not  complied  with  within  a specified 
time.  Among  the  many  objects  which  have  the  attention 
of  THE  UNION  there  is  none  which  has  been,  or  will 
be  so  Important  a factor  in  the  gradual  elimination  of  this 
great  menace  to  life  and  property  in  m.any  cities,  as  its 
efforts  to  regulate  and  control  the  conflagration  hazard. 


[ Page  11  1 


4.  Equitable  Rates. 

Without  equitable  rates  the  burden  of  the  msurance 
tax  will  be  unequally  distributed ; some  property  owners 
bearing  more  and  others  less  than  their  fair  share  of 
the  burden. 

For  many  years  the  practice  was  to  have  rates  estab- 
lished by  local  agents,  a practice  open  to  two  very 
serious  objections  — first,  because  the  local  agents  could 
not  have  the  experience  or  the  knowledge  requisite  to 
determine  whether  rates  were  correctly  assessed  or  not ; 
second,  because  the  rate  makers  often  were  influenced  by 
self-interest,  partiality  and  prejudice,  so  that  discriminations 
in  rates  were  the  almost  universal  and  inevitable  result. 
Recognizing  the  frequent  injustice  to  property  owners  of 
this  method  of  rating,  THE  UNION  has  advocated  the 
making  of  rates  by  persons  employed  especially  for  that 
purpose,  having  no  personal  interest  and  therefore,  being 
enabled  to  apply  the  schedules  prepared  by  THE  UNION 
impartially  and  “without  fear  or  favor”  to  all  property 
alike.  In  this  manner  THE  UNION  has  been  enabled  to 
more  generally  establish  equitable  rates  than  under  any 
other  plan,  and  while  it  cannot  be  claimed  that  the  results 
are  now  always  satisfactory,  they  certainly  are  much  more 
so  than  before  the  formation  of  THE  UNION.  Without 
such  organization  each  company  would  be  governed  by 
its  own  experience  only  in  the  matter  of  fixing  rates,  each 
one  would  be  obliged  to  employ  its  own  corps  of  experts, 
largely  in  excess  of  the  number  now  employed,  for  the 
sole  purpose  of  inspecting  and  rating  every  risk  within  the 
territory  in  which  it  transacts  business,  thereby  enormously 
increasing  the  cost  of  doing  the  business,  while  the  rates 
of  no  two  companies  would  be  alike,  and  the  difficulties 
and  perplexities  of  writing  insurance  would  be  incalculably 
enhanced. 

It  is  only  proper,  in  this  connection,  to  consider  the 
I Page  12  ] 


advantages  of  such  an  organization  to  the  assured  as  well. 
It  is  manifest  that  whatever  enhances  the  cost  of  doing 
the  business  must  necessarily  enhance  the  cost  of  insur- 
ance to  the  property  owner  and,  conversely,  if  the  cost 
of  doing  the  business  is  materially  reduced  by  organized 
effort,  the  property  owner  is  benefited  by  a correspond- 
ing reduction  in  rate.  It  is  important  to  him  — especially 
if  the  value  of  his  property  is  large  — that  the  rates  are 
BOTH  UNIFORM  AND  STABLE,  which  cannot  be  if 
the  companies  are  not  permitted  to  base  their  rates  upon 
their  united  experience,  employing  a few  competent  men 
to  apply  such  schedules  based  upon  such  average  experi- 
ence, rather  than  an  army  of  men  who  would  otherwise 
be  employed  to  fix  rates  based  upon  limited  individual 
experience.  It  is  also  of  the  greatest  Importance  that  his 
policies  be  concurrent  and  the  forms  prepared  by  com- 
petent men  and  thorough  underwriters,  fitted  by  txalning 
and  education  to  properly  draw  important.contracts,  involv- 
ing material  Interests,  Unless  companies  can  co-operate 
in  this  matter  of  drafting  concurrent  forms,  the  policy 
holder  is  sure  to  have  trouble  in  event  of  loss,  because  of 
the  impossibility  of  reconciling  differences  between  the 
companies,  even  if  he  does  not  find  that  considerable 
property  values  have  been  omitted  entirely  from  the 
protection  of  his  policies  on  account  of  imperfect  descrip- 
tion or  otherwise.  For  these  reasons  the  assured  is 
relatively  as  much  benefited  as  are  the  companies,  by  an 
association  having  for  its  object  the  fixing  of  fair  and 
equitable  rates,  the  drafting  of  proper  policy  contracts 
and  the  observance  of  correct  underwriting  principles. 


[ Page  13  ] 


Competition  of  Companies 

NOT  MEMBERS  OF  THE  UNION 


HE  number  of  companies  which  are  not 
members  of  THE  UNION  far  exceed  those 
within  that  organization.  Of  this  very  large 
number  of  what  may  be  termed  non-affili- 
ating companies,  a very  considerable  num- 
ber are  equally  as  strong  and  responsible  as  many  of 
the  Union  companies  and  offer  to  the  property  owner 
the  most  undoubted  indemnity  against  loss  by  fire.  These 
companies,  while  preserving  their  independence  and  differ- 
ing in  some  essential  particular  from  the  principles  and 
methods  adopted  by  THE  UNION,  nevertheless  usually 
cooperate  with  that  organization  in  the  observance  of 
correct  underwriting  practices  and  adhere  to  the  tariff 
rates  at  all  important  points,  sharing  also  to  some  extent 
in  the  cost  of  maintaining  independent  tariff  associations 
and  rating  bureaus,  by  subscribing  to  the  rates  established 
by  such  agencies.  Aside  from  these  reliable  companies, 
there  is  a horde  of  others,  stock,  mutual  and  Lloyds, 
competing  for  business  upon  any  terms  which  will  pro- 
cure it.  Bearmg  no  share  of  the  expense  incurred  by 
the  Union  companies  for  classification,  surveys,  inspec- 
tions, ratings  and  other  matters  essential  to  the  intelligent 
and  proper  conduct  of  the  business,  they  nevertheless 
derive  as  much  benefit  therefrom  as  do  the  Union  com- 
panies. Sharing  in  none  of  this  cost,  they  are  in  position 
to  and  do  sell  their  policies  at  less  cost  and  thereby 
induce  many  people  to  believe  that  if  it  was  not  for  their 
competition  the  great  Insurance  Trust”  would  m.ake  the 
rates  of  insurance  still  more  extortionate.  Instead  of  this 
being  true,  if  the  costs  of  classification,  surveys,  inspec- 
tions and  ratings  were  shared  equally  by  all  of  the  com- 
panies, the  rates  could  and  would  be  less  than  they  now 
I Pace  14  ] 


are.  This  element  of  cost  must  enter  Into  the  considera- 
tion of  rates  and  whatever  the  average  reduction  in  cost 
would  be  on  account  of  increased  contribution,  such  reduc- 
tion would  appear  as  a saving  in  rate. 

At  present  many  property  owners  buy  inferior  indem- 
nity because  it  is  cheap  and  being  induced  to  do  so  by 
the  belief  that  the  rates  established  by  the  leading 
companies  are  unfair  and  exorbitant.  Such  was  the 
general  impression  which  prevailed  at  Baltimore  a short 
time  before  the  great  conflagration  and  the  citizens  had 
called  a meeting  for  the  purpose  of  protesting  against  the 
rates  then  in  force.  The  date  of  the  meeting  found  the 
city  fire-swept  and  the  rate  question  had  been  settled  by 
the  most  convincing  of  all  arguments.  The  companies 
which  had  irisisted  upon  adequate  rates  paid  to  their 
policy  holders  over  Thirty-two  Million  Dollars,  while 
those  who  bought  cheap  insurance  are  still  fruitlessly 
endeavoring  to  collect  over  Four  Hundred  Thousand 
Dollars  from  companies  whose  policies  had  been  pur- 
chased at  less  than  the  tariff  rates. 


The  Effect  of  Adverse  Laws 


VERY  law  which  is  enacted,  having  for 
its  purpose  the  restriction  of  fire  insurance 
companies  in  the  conduct  of  their  business, 
or  which  increases  the  taxes  they  are 
required  to  pay,  the  expenses  of  operation 
or  the  losses  they  sustain,  is  a law  which  reacts  on  the 
property  owner  in  the  way  of  increased  cost  of  insurance, 
for  the  very  simple  reason  that  INSURANCE  IS  MUTUAL 
IN  PRINCIPLE,  even  when  conducted  by  stock  com- 
panies. 

The  following  laws  always  add  to  the  cost  of  the 
business  and  consequently  to  the  cost  of  insurance  pur- 
chased by  the  property  owner. 

The  Valued  Policy  Law.  A law  has  been 
enacted  in  a number  of  states  which  requires  an  insurance 
company  to  pay  the  full  amount  of  insurance  upon  prop- 
erty which  has  been  totally  destroyed  by  fire,  even  if  the 
value  of  the  property  so  destroyed  is  much  less  than  the 
amount  of  the  insurance  thereon.  Such  a law  is  an 
incentive  to  crime.  It  invites  incendiarism  and  the  grossest 
kind  of  fraud  and  the  insurance  companies  are  powerless 
to  prevent  it.  In  every  state  where  this  law  has  been 
enacted  it  has  been  denounced  by  the  state  officials  in 
unmeasured  terms. 

The  Insurance  Commissioner  of  Wisconsm  says : 


“ The  valued  policy  law  in  this  state,  as  in  all 
“ other  states  in  which  it  has  been  tried,  has 
**  been  the  means  of  increasing  losses,  and  plac- 
“ing  a premium  on  incendiarism.  The  very 
“foundation  principles  of  fire  insurance  are 
“opposed  to  such  a law.  ‘Fire  insurance  is 
“indemnity;  it  should  never  be  gain*;  it  is 
“intended  only  to  make  good  the  actual  loss 
“ sustained,  and  to  make  a company  liable,  in 

l Pas«  16  ] 


“ case  of  total  loss,  for  the  full  face  of  the  policy, 
“irrespective  of  the  value  of  the  property,  has 
“ been  the  means  of  increasing  the  number  of 
, “ fires,  and  compelled  the  payment  of  thousands 

“ of  dollars,  thus  increasing  the  rates  to  honest 
“men.  Such  laws,  together  with  high  taxes 
“ have  prevented  many  companies  from  entering 
“ the  state  and  giving  our  people  the  benefit  of 
“ competition.” 

The  Insurance  Commissioner  of  Massachusetts  char- 
acterizes such  a law  as 

“ hateful  to  good  morals  and  offensive  to  public 
“ policy,  because  a temptation  to  social  crime.” 

Governor  Pattison  of  Pennsylvania,  in  vetoing  a valued 
policy  law  passed  by  that  state,  said, 

“ Overinsurance  and  overvaluation  are  con- 
“ducive  to  fraud,  perjury  and  arson;  they 
“ breed  crime  — the  most  dangerous  and 
“ demoralizing.  Commonwealths,  which  in 
“obedience  to  a false  public  clamor,  have 
“ ingrafted  a contrary  principle  upon  their 
“insurance  laws,  have  reaped  the  whirlwind, 

“ and  in  the  end  honest  insurers  will  have  to 
“ pay  the  penalty  of  largely  increased  rates.” 

Governor  Altgeld  of  Illinois,  in  vetoing  a similar  law 
said, 

“ Insurance  is  an  indemnity,  not  a speculation. 

“It  is  intended  to  protect  a man  against  loss, 

“not  to  give  him  something  for  nothing.  Its 
“ object  is  to  make  a man  whole,  so  that  he  shall 
“ be  no  worse  off  after  a fire  than  before.  The 
“ principle  involved  in  this  bill  would  enable  a 
“ man,  in  many  cases,  to  be  twice  as  well  off 
“ after  a fire  as  he  was  before.  In  all  cases 
“ where  a dishonest  man  could,  by  conniving 
“ with  an  agent,  or  in  any  other  way,  secure 
“ insurance  for  more  than  the  real  value  of  his 
“ property,  a fire  would  be  a blessing  to  him. 

“ There  would  be  a standing  bribe,  a per- 
“petual  inducement  to  allow  his  property  to 
“ bum  down — I will  not  say  to  have  it  burn 


I Page  17  I 


“dov/n — and  when  it  is  remembered  that  a 
“fire  in  one  building  always  endangers  2uid 
“ frequently  destroys  property  near  by,  which 
“ often  is  not  insured,  it  v/ould  be  bad  policy 
“ for  the  State  to  permit  a condition  of  affairs 
“to  exist,  which,  to  say  the  least,  tended  to 
“ increase  fires.” 

The  Insurance  Commissioner  of  Ohio  says: 

“To  say  that  fires  have  steadily  increased  since 
“ the  enactment  of  this  obnoxious  law  is  to  put 
“it  mildly.  * * fr  is  an  open  bid  for 

“arson.  The  Legislature  of  Ohio  ought  to 
“ have  repealed  the  law  years  ago.  I do  not 
“regard  it  as  a desirable  lav/  to  have  upon 
“ the  statute  books.  The  rates  have  steadily 
“increased  since  the  enactment  of  this  law, 
“clearly  showing  that  honest  people,  in  the 
“ end,  are  compelled  to  pay  for  the  dishonest 
losses. 

The  baleful  effects  of  this  law  in  Ohio  may  be 
appreciated  by  reading  the  following  extract  from  the 
official  report  of  the  Fire  Marshal  of  that  state  for  1903. 
He  says: 

“ The  losses  from  incendiary  fires  for  the  last 
“year  are  estimated  at  $800,000,  a part  of 
“the  fires  reported  as  from  unknov/n  causes 
“ being  charged  to  arson.  The  motives  behind 
“these  incendiary  fires  were:  To  defraud 

“insurance  companies,  468;  malice,  110; 
“mischievous  boys,  36;  pyromaniacs,  29; 
“intoxication,  28;  to  avoid  or  secure  work, 

“18;  total,  689.” 

NOTE:  The  $800,000  of  incendiary  loss  is  for  the  year  1903,  whfle 
the  689  incendiary  fires  occurred  during  a period  of  three  years. 

, i^Anti-Compact  LuJP.  A law  which  prohibits 
companies  from  co-operating  in  the  collection  of  statistics 
with  reference  to  losses  and  the  cost  of  insuring  various 
classes  of  property,  or  in  the  preparation  of  rating  sched- 
ules based  upon  such  experience,  or  which  prevents  the 
companies  from  agreeing  upon  the  rates  which  may  be 
determined  under  and  by  such  schedules,  or  which 

[ Page  18  ] 


prohibits  the  companies  from  agreeing  upon  the  amount  of 
commissions  or  compensation  to  be  paid  to  local  agents, 
is  a law  which  might  well  be  entitled  “An  Act  to 
Increase  the  Cost  of  Insurance  and  to  Prevent  the 
Reduction  of  the  Fire  Hazard.”^  Such  a law,  in  its  final 
results,  will  prove  as  prejudicial  to  the  citizen  as  has  the 
valued  policy  law.  If  the  insuring  public  are  to  obtain 
equitable  rates  of  insurance,  the  insurance  companies  must 
be  permitted  to  combine  their  experience  in  order  to 
arrive  at  the  average  cost  of  carrying  every  kind  of  risk. 
Insurance  is  unlike  any  other  business  and  there  is  no 
criterion  for  determining  the  proper  rate  upon  any  risk 
except  by  comparing  it  with  similar  risks  which  have  been 
insured  in  the  past,  and  the  larger  the  number  of  such 
risks  which  can  be  aggregated  for  comparison,  the  more 
nearly  an  equitable  rate  can  be  ascertained.  The  experi- 
ence of  one  company  will  not  do,  for  it  will  have  written 
comparatively  few  of  the  class,  and  it  may  have  a very 
sKght  loss  ratio  or  it  may  have  an  extremely  heavy 
one.  [ Obviously,  insurance  must  be  based  on  the  law  of 
average,  and  if  the  companies  are  not  permitted  to 
assemble  their  experience  tables  in  order  to  ascertain  the 
general  average  upon  each  class,  the  business  becomes 
one  of  guesswork  instead  of  science.  Besides  this,  the 
natural  and  practical  result  of  combmation  and  collab- 
oration of  insurance  companies  is  to  encourage  the 
improvement  of  buildings,  to  secure  the  adequacy  of 
water  supply,  the  efficiency  of  fire  departments  and  the 
improvement  of  streets,  giving  credit  in  the  way  of 
reduced  rates  for  every  improvement  made.  If  com- 
panies are  not  permitted  to  agree  upon  such  credits  there 
will  be  no  inducement  to  make  these  improvements  and 
cities  and  towns  will  continue  to  be  subject  to  the 
ravages  of  fires.  The  valuable  assistance  which  fire  insur- 
ance companies  have  rendered  in  the  gradual  improvement 
of  various  cities  and  towns  has  been  repeatedly  demon- 
strated during  the  past  few  years. 


[ Page  19  J 


Anti-Co-insurance  Law.  A law  which  pro- 
hibits a fire  insurance  company  from  agreeing  with  a 
pdicy  holder  that  he  will,  in  consideration  of  a reduction 
in  the  rate  of  insurance,  maintain  a certain  amount  of 
insurance  upon  his  property  in  proportion  to  its  value, 
infringes  upon  his  liberty  as  a citizen  by  depriving  him 
of  the  right  to  make  any  contract  he  desires,  so  long 
as  he  does  not  infringe  upon  the  rights  of  others.  A 
co-insurance  clause  is  not  operative  in  case  of  a total 
loss.  The  large  majority  of  fires  cause  but  partial  loss 
to  the  property  imperiled.  If  full  insurance  is  carried  on 
all  property  which  sustains  loss  by  fire,  the  average  loss 
per  $1,000  involved  will  be  much  less  than  if  a small 
amount  of  insurance  is  carried.  As  the  possibility  of  a 
total  loss  to  the  insurer  increases,  so  must  his  rate  of  pre- 
mium increase  to  provide  for  such  increased  possibility  of 
loss.  If  the  total  value  of  a certain  class  of  risk  amounts 
to  $2,000,000,  upon  which  there  is  an  average  loss  of 
$20,000,  this  entire  property  should  produce  sufficient 
premiums  to  pay  this  annual  loss  charge.  If  full  insurance 
of  $2,000,000  is  carried,  the  rate  would  be  1 per  cent 

and  the  premium  would  be $20,000. 

If  60  per  cent  of  insurance  or  $1 ,600,000  is  carried, 
the  rate  would  be  1 % per  cent  and  the  premium  would 
be $20,000. 

If  60  per  cent  of  insurance  or  $ 1 ,200,000  is  carried, 
the  rate  would  be  1 ^ per  cent  and  the  premium  would 
be $20,000. 

It  will  readily  appear  from  the  foregoing  that  it  is 

impossible  to  determine  what  rate  of  premium  should  be 
charged,  unless  the  approximate  amount  of  insurance  to 
value  is  also  known  and  it  is  also  apparent  why  it  is  pos- 
sible to  give  to  the  assured  a reduction  in  rate,  providing 
he  will  agree  to  maintain  a certain  amount  of  insurance 
upon  his  property.  Having  his  option  whether  he  will 
accept  the  condition  in  consideration  of  the  reduced  rate. 


F Page  20  1 


or  pay  a higher  rate  without  Si,  diere  is  no  just  reason 
why  he  should  be  deprived  of  that  right  by  law. 

Taxation.  A law  which  imposes  a tax  upon  the 
gross  premium  receipts  of  fire  insurance  companies  is  a law 
which,  indirectly,  imposes  a tax  for  an  equal  or  greater 
amount  upon  the  property,  owners  of  the  state.  This  sub- 
ject was  fully  treated  in  a recent  letter  from  the  President 
of  THE  UNION  to  Hon.  Hemy  R.  Prewitt,  Insurance 
Commissioner  of  Kentucky,  and  as  what  was  there  said 
applies  with  equal  force  to  fire  insurance  taxation  every- 
where, the  following  extract  is  made  from  said  letter : 
“Your  present  fees  and  taxes — state  and  muni- 
“cipal  — aggregate  3.71  per  cent  upon  the 
“ gross  premium  receipts,  a discrimination  against 
“ the  insurance  companies  which  is  prac- 
“ ticed  against  no  other  taxpayers,  corporate 
“ or  individual.  What  would  be  thought  of  a 
“ proposition  to  tax  a merchant  upon  his  gross 
“ sales  without  allowing  any  deduction  for  cost 
“ of  merchandise  sold  or  expenses  of  his 
“business?  Yet  your  state  taxes  the  com- 
“panies  3.71  per  cent  UPON  EVERY 
“DOLLAR  WHICH  THEY  HAVE  PAID 
“OUT  TO  YOUR  CITIZENS  FOR  LOSSES 
“AND  EXPENSES. 

“During  the  past  13  years  the  premium  receipts  in 
“Kentucky  of  stock  fire  insurance  companies  have 
“ amounted  to  . . . $4 1 ,2 1 6, 1 02 

“ Losses  have  amounted  to  $23,692,739 
“ Expenses  (not  including 

taxes) 13,609,557  37,302,296 

“ Leaving,  after  deducting 
losses  and  expenses, 

the  sum  of  . . . 3,913,806 

**  Upon  which  the  state 
and  municipal  taxes 

and  fees  have  been  1 ,529, 1 1 7 

“or  39  PER  CENT  UPON  THE  NET  INCOME. 
“The  companies  have  remaining  the  munifi- 
“ cent  sum  of  $2,384,689  as  the  results  of  the 
“ operations  of  1 3 years,  which  divided  among 
“ the  115  companies  now  doing  business  in 
“ your  state,  would  afford  an  annual  profit  of 
“$1,595  to  each  company.” 


[ Page  21  J 


“This  method  of  taxation  upon  the  basis 
of  gross  premiums,  when  analyzed,  comes 
pretty  near  to  confiscation,  as  you  will  see. 
All  that  is  needed  to  make  the  transactbn 
complete  is  to  so  amend  your  laws  that  the 
companies  shall  pay  the  balance  to  the  state 
of  Kentucky  and  its  various  municipal  corpor- 
ations. If  a tax  of  39  per  cent  upon  net 
income  is  justified,  then  there  is  no  reason 
why  your  state  should  not  take  it  all.  I do 
not  overlook  the  fact  that  other  states  have 
adopted  the  same  manner  of  taxation  as  has 
Kentucky,  but  that  only  serves  to  emphasize 
the  unreasoning  prejudice  which  has  marked 
the  legislation  of  many  of  the  states  when 
dealing  with  a class  of  corporations  which  has 
become  absolutely  essential  to  the  success  and 
prosperity  of  any  state.  But  if  your  legida- 
tors  and  statesmen  are  seeking  for  meaRS 
whereby  the  rates  of  insurance  may  be 
resduced  and  its  cost  to  your  property  owners 
lessened,  they  might  ^vell  ask  themselves  this 
serious  question:  ‘ Why  should  a business, 

which  is  of  absolute  necessity  to  every 
merchant,  busmess  man,  manufacturer  or 
owner  of  property,  real  or  personal,  within 
our  state ; which  daily  and  hourly  stands 
between  some  of  our  citizens  and  absolute 
ruin;  which  preserves  the  merchant’s  credit 
and  without  which  our  modern  business 
methods  would  stagnate ; which  now  is 
the  very  keystone  of  their  prosperity;  why 
should  this  business  be  singled  out  for 
this  unjust  discriminative  taxation’  ? No  other 
business  could  or  would  submit  to  an  income 
tax  for  any  amount,  much  less  one  amounting 
to  over  one-third  of  the  same.  If  the  injustice 
of  the  discrimination  does  not  appeal  to  your 
legislators,  they  should  bear  in  mind  that  this 
imposition  must  eventually  fall  upon  the  citi- 
zens of  the  state  in  the  way  of  an  increase 
in  rates.” 


SOME  MISTAKEN  IDEAS 

1 . The  idea  that  the  difference  between  the  pre- 
miums received  and  the  losses  paid  is  all  clear  profit. 
The  average  loss  ratio  for  the  past  ten  years  has  been 
56.7  per  cent,  and  the  expense  ratio  37.3  per  cent,  so 
that  after  paying  losses  and  expenses  the  companies  have 
6 per  cent  remaining,  out  of  which  to  pay  losses  on  out- 
standing policies  ranging  in  term  from  one  day  to  five 
years ; dividends  upon  capital  invested,  and  contribution 
to  the  surplus  which  they  should  accumulate  against  the 
“Rainy  Day”  which  MUST  BE  RECKONED  UPON. 
In  the  ten  years  ending  December  31,1 904,  the  actual 
underwriting  profits  of  144  leading  fire  insurance  com- 
panies amounted  to  56-100  of  one  per  cent,  or  in  actual 
figures  to  $8,682,598,  divided  among  144  companies 
as  the  net  result  of  ten  years’  business,  or  an  average  of 
$6,030  per  annum  for  each  company. 

2.  The  idea  that  dividends  declared  by  the  leading 
companies  are  excessive.  If  a company  is  reported  to 
have  declared  a dividend  of  20  or  30  per  cent,  it  must 
not  be  assumed  that  such  dividend  is  excessive,  for  the 
reason  that  the  stockholders  have  invested,  not  only  the 
capital,  but  every  dollar  of  assets  as  well.  One  of  the 
leading  companies  has  a capital  of  $ 1 ,000,000,  while  its 
total  assets  amount  to  the  sum  of  $ 1 6,000,000,  so  that 
the  stockholders  have  invested  sixteen  times  the  amount 
of  the  capital,  and  ai^  entitled  to  the  earnings  on  the 
entire  assets,  just  as  much  as  they  are  upon  the  earnings 
of  the  capital  first  invested.  A dividend  of  30  per  cent 
upon  the  capital  stock,  therefore,  amounts  to  but  1 Yl  per 
cent  upon  the  assets.  Stock  of  this  company  has  just  sold 
in  open  market  for  $1,371  per  share,  so  that  a dividend 
of  $30  per  share  would  mean  a dividend  of  a little  over 
2 per  cent  upon  the  amount  paid  per  share. 


i Page  23  ] 


REMEMBER 

That  Insurance  is  Mutual  in  Principle  and  being  so 
?OUR  interests  and  those  of  the  companies  with  which 

insure  are  mutual. 

That  an  insurance  contract  is  one  demanding  absolute 
good  faith  on  both  sides. 

That  if  YOU  are  unfortunate  enough  to  have  a lo^ 
by  fire,  the  BEST  insurance  is  NONE  TOO  GOOD. 

^ That  if  fire  insurance  companies  do  not  secure  fair 
rates,  they  cannot  survive  great  conflagrations.1  Thirty 
companies  failed  or  retired  in  1904,  the  year  of  the 
Baltimore  conflagration. 

^ That  rates  are  highest  in  those  states  where  the  laws 
are  the  most  oppressive  and  burdensome  and  the  lowest 
in  those  states  where  the  laws  are  the  mildest  and  most 
reasonable. 

That  the  leading  fire  insurance  companies  are  officered 
and  managed  by  honest  men,  who  are  honestly  striving 
to  give  YOU  the  lowest  possible  rates,  consistent  with 
ability  to  pay  every  legitimate  claim. 

That  YOU  should  read  your  policy  before  a fire,  so 
that  you  may  have  no  cause  to  complain  after  a fire  that 
. it  does  not  cover  as  you  intended  it  should. 


Erie,  Pa.,  February  1,  1906 


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